Portfolio

Tuesday, December 30, 2008

Mergers are really difficult transactions to bring about and even more difficult to make work post-merger.The rewards for doing so properly and well can be significant.In these times, we are likely to see a number of mergers taking place between companies which will find it really hard on their own to raise cash to lengthen their runways or for those for whom the commercial logic is overwhelming.Looking back, one can see some mergers which had they not happened may well have led to the demise of both companies (or at least a protrated and far more capital intensive journey) whilst what emerged was a real powerhouse.I'm thinking particularly of the Betfair and Flutter.com (remember them?)merger in December 2001. Current Betfair revenues in the order of £250m and PBT over £40m.Image via CrunchBaseI'm also not forgetting the LoveFilm and VideoIsland merger of April 2006, creating Europe's dominant on-line DVD rental service now turning over some £70m profitably.We will be encouraging TAG companies to look at their markets carefully and consider whether getting together creates more value for everyone in the long run.The difficulties are - fairly obviously - a) arriving at relative values andb) resolving the question of who runs the combined entity and how.It takes some skill, no little suppression of ego, sensitivity and far sightedness to achieve a good result.The benefits can be huge. Aside from rationalisation of overheads, marketing can be made so much more efficient and effective (less competition for those keywords, greater clickthrough rates from natural and paid search)and its far easier to do those all important business development partnerships.

Commentators need to focus more on what value has been created, rather than on who 'won' and who 'lost'. In the case of the great mergers, everyone's a winner.

Thursday, December 25, 2008

2008 can be split into 2 distinct periods. Pre-crunch and Post-crunch.In the coming days we will all be reflecting on a pretty crazy year and most will be fearful, uncertain or excited by the coming one.I think we are all agreed that 2009 offers significant opportunities and challenges.

We are in for some very tough times. The funding climate has changed radically and the chill wind is blowing.All sensible companies are focusing on their cash. Getting themselves to break even as quickly as possible and focusing more intently on what makes a difference than ever before.TAG companies are all looking closely at their costs, their revenue generation and their cash runways. They have been for some time now.The opportunities are still there - but may be found in different places from the pre CC (Credit Crunch) era.

Certainly, competitors may be hurting and this will represent opportunities for some. Businesses that genuinely remove cost, save money and increase efficiency will be attractive as will those with well proven business models and with revenues continuing to rise.

Interesting to look at what date defined the start of the credit crunch.For the tech community at large, it seems that Sequoia Capital’s publication of their 56 Slide Presentation Of Doom - October 7th,2008 - marked the date.

It was much earlier for most others. On 22 February 2008 Northern Rock was taken into state ownership. On September 15, 2008, Lehman Bros. filed for Chapter 11 bankruptcy protection, the filing marked the largest bankruptcy in U.S. history. On September 16th AIG suffered a liquidity crisis following the downgrade of its credit rating - it had been the 18th-largest public company in the world! And so it went ...

Certainly, if one was looking for signs (and who was?) we could go back to March 2007, when the United States' subprime mortgage industry collapsed due to "higher-than-expected" home foreclosure rates.

However for the tech start-up scene, the fundamentals are still strong. Technology is likely to lead the way out of recession for many economies. Better application of technology leads to lower costs and greater productivity. Broadband penetration continues to increase, eCommerce is holding up. December numbers are not out yet but November continued to show on-line gaining share from off-line. So it is with advertising. Whilst there is an overall slump, on-line continues to win share from off-line.

Of course, what has changed is that it is much more difficult to get ideas funded, values are not what they were and exits are very hard to achieve.

The idea that the funding community is closed for business is, however, not entirely correct.The big brand Venture Capital Funds still have money to invest and in our view most will be successful in raising new funds - as Accel have recently.Angels will return to the funding scene seeking capital efficiency and opportunity.

Since October 7th, 9 of TAG's companies have received follow-on funding (or have term sheets leading to that end).

As regular readers know, this blog essentially showcases the TAG portfolio. Since the portfolio is pretty well representative of the tech start-up scene, I hope that it of wider interest than just to friends of TAG.

Good luck in all your 2009 endevours!

To finish off this serious post, I share with you the movie that our friends at First Round Capital produced for the season of goodwill.First Round are a special kind of firm with whom we share many common values - some of which are reflected in this video.

Their mission is to measure the "Carbon Footprint" of everything on Earth.

This goal requires a neutral aggregation platform. AMEE is that platform.

The AMEE platform is being used internationally by many organisations including Defra (DECC), The Irish Government, The Welsh Assembly, Google, Morgan Stanley, Nesta, the Energy Saving Trust, BRE, Radiohead, Sun Microsystems, plus numerous other IT, business services and software companies.

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AMEE has been designed to deliver a new standard in functionality, transparency and interoperability. AMEE's aim is to map, measure and track all the energy data on Earth. This includes aggregating every emission factor and methodology related to CO2 and Energy Assessments (individuals, businesses, buildings, products, supply chains, countries, etc.), and all the consumption data (fuel, water, waste, quantitative and qualitative factors).

It is a web-service (API) that combines measurement, calculation, profiling and transactional systems. Its algorithmic engine applies conversion factors from energy into CO2 emissions, and represents data from 150 countries.

The company has just announced that it has secured substantial Series A funding from leading VC funds in the USA and UK.

Tuesday, December 09, 2008

Dopplr has appointed Marko Ahtisaari as CEO. Dopplr, the online service for smarter travel, today announced it has appointed Marko Ahtisaari as CEO, effective January 1st 2009. This is great news for the company as it prepares to take its next steps. Marko was a founding investor in Dopplr and has been active in guiding the company. Co-founder and founding CEO Lisa Sounio will become Chairman, alongside fellow board members Tyler Brûlé and Saul Klein.

Since launching to a select group of global companies last fall, Dopplr has attracted an international following of smart travellers. Lisa and the team have done a super job of launching the brand and building a strong following. As a founding investor Marko knows the team well and with his background in mobile services and media is an excellent fit to grow the business. Today, Dopplr is an important 'intention sharing service online', akin to social platforms like Twitter and Facebook, but with a tight focus. When people share their travel plans and tips through Dopplr their mind is already set on the travel experience: on where their colleagues and friends are going, how they’re getting there and what hotels they’re staying at.

Marko Ahtisaari has worked previously as Director of Design Strategy at Nokia and serves on the board of directors of F-Secure and Artek. Most recently Ahtisaari has been Head of Brand & Design at Blyk, the free mobile network for young people funded by advertising, and will continue in a role supporting Blyk in its partnering and expansion strategy. In September 2008 Dopplr announced its second financing round from a group of prominent international investors — all users of the service.

Monday, December 08, 2008

Douglas de Jager, co-founder of Byteplay, the company that created Dothomes, has put together a useful set of links, interesting articles, golden rules for entrepreneurs and the like. They can found here.Doug tells me he'll be adding to the list regularly.There is some good Xmas reading in amongst his recommendations.